Raj Holdings is a diversified company with a fairly strong position in certain segments. It initialy was only operating in FMCG Segment but over the past 20 years has diversified in the area of real estate and financial services also. The financials of the company for the last five years are given below: Rs. in crore Income Statement (March 31st) 2017 2018 2019 2020 2021 · Net sales 560 610 630 685 744 · Profit before interest and tax 80 91 100 118 124 · Interest 20 22 23 25 27 · Profit before tax 60 69 77 93 97 · Tax 20 24 25 30 31 · Profit after tax 40 45 52 63 66 · Dividends 10 12 14 16 16 Balance Sheet Summary · Equity capital (Rs.5 par) 50 50 50 50 50 · Reserves and surplus 200 233 271 318 68 Loan funds 120 130 135 140 143 Capital employed 370 413 456 508 561 Net fixed assets 250 270 306 343 373 · Investments 20 21 25 30 28 Net current assets 100 122 125 135 160 Total assets 370 413 456 508 561 · Market price per share (year end) 35 40 51 57 65 The year 2020-2021 has just ended. The current market price per share is Rs.65. a. Decompose the ROE for the last two years in terms of five factors as per . (7.5 Marks) b. Estimate the EPS for the next year (2021-2022) using the following assumptions: (i) Net sales will grow at 12%. (ii) PBIT / Net sales ratio will improve by 1% over its 2021 value. (iii) Interest will increase by 8 percent over its 2021 value. (iv) Effective tax rate will be 30 percent. (7.5 Marks)
Raj Holdings is a diversified company with a fairly strong position in certain segments. It initialy was only operating in FMCG Segment but over the past 20 years has diversified in the area of real estate and financial services also. The financials of the company for the last five years are given below:
Rs. in crore
Income Statement (March 31st) 2017 2018 2019 2020 2021
· Net sales 560 610 630 685 744
· Profit before interest and tax 80 91 100 118 124
· Interest 20 22 23 25 27
· Profit before tax 60 69 77 93 97
· Tax 20 24 25 30 31
· Profit after tax 40 45 52 63 66
· Dividends 10 12 14 16 16
· Equity capital (Rs.5 par) 50 50 50 50 50
· Reserves and surplus 200 233 271 318 68
Loan funds 120 130 135 140 143
Capital employed 370 413 456 508 561
Net fixed assets 250 270 306 343 373
· Investments 20 21 25 30 28
Net current assets 100 122 125 135 160
Total assets 370 413 456 508 561
· Market price per share (year end) 35 40 51 57 65
The year 2020-2021 has just ended. The current market price per share is Rs.65.
a. Decompose the ROE for the last two years in terms of five factors as per . (7.5 Marks)
b. Estimate the EPS for the next year (2021-2022) using the following assumptions:
(i) Net sales will grow at 12%.
(ii) PBIT / Net sales ratio will improve by 1% over its 2021 value.
(iii) Interest will increase by 8 percent over its 2021 value.
(iv) Effective tax rate will be 30 percent. (7.5 Marks)
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